In economics, the term business competition or competition indicates a condition where different firms try to obtain a share of a limited product by varying elements of the marketing mix such as price, product, promotion and place.
In a classical economic context, competition incites companies to develop new products, services and technologies which permit customers to have a better and greater goods’ selection. This greater selection usually provokes the decrease of the product’s prices, compared to the price in a monopoly or oligopoly.
Competition is an element of the markets and is a result of lack of human satisfaction.
The term competition has been firstly described by Adam Smith as the capacity of allocating productive resources to their most highly valued uses and encouraging efficiency. Then, the macroeconomic theory has distinguished two types of competition: the perfect competition and the imperfect competition.
Currently, there are three different levels of competition: direct competition, substitute or indirect competition and budget competition.
In a direct competition environment, products which have the same function compete against each other.
In a substitute or indirect competition environment, products are closely substituted for one another.
Finally, budget competition is the broadest form of competition which considers how much a consumer may want to spend the money he/she has.
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